ConocoPhillips (COP), the U.S. oil and gas company that plans to spin off its refining business next year, is seeking buyers for its Alliance refinery in Belle Chasse, Louisiana, according to two people familiar with the company’s plans.
The Gulf Coast plant, which can process up to 247,000 barrels a day, may fetch $700 million to $1 billion excluding inventory, Sam Margolin, a refining analyst for Global Hunter Securities LLC, said in a telephone interview today.
ConocoPhillips plans to create a new company called Phillips 66 with the spinoff of its refining, chemicals and pipeline businesses in the first half of 2012. The Alliance sale would happen after the split, one of the people said. The two people declined to be quoted because they weren’t authorized to discuss the sale publicly.
Phillips 66 is poised to become the largest U.S. independent refiner after the spinoff, even as it reduces its global refining capacity from 2.7 million barrels a day in 2009. An Alliance sale, together with the potential shutdown of its Trainer, Pennsylvania, plant and recent sale of a refinery in Wilhelmshaven, Germany, would shrink the new company’s capacity by about 700,000 barrels a day.
Phillips 66 will focus on growth opportunities in its chemicals and pipelines segments, as well as investing in “high-return” refining operations, according to a Nov. 2 ConocoPhillips presentation. ConocoPhillips and Cenovus Energy Inc. (CVE) have spent $3.8 billion upgrading the jointly-owned Wood River, Illinois, refinery to process increasing volumes and varieties of crude produced in North America, including Canada’s oil sands.
PBF Possible Buyer
Rich Johnson, a spokesman for Houston-based ConocoPhillips, declined to comment on the potential sale, citing the company’s policy of not responding to market rumors or speculation.
A possible buyer for Alliance may be private equity-backed PBF Energy Partners LP, which has bought three refineries on the East Coast since 2010 and may seek exposure to other geographical areas, said Global Hunter’s Margolin, who does not rate ConocoPhillips or own its shares. PBF is backed by private- equity firms Blackstone Group LP (BX) and First Reserve Corp.
The refinery may attract buyers eager to expand access to the U.S. Gulf Coast, where the ability to export diesel fuel to South America and other markets has boosted profits for companies that process crude, Phil Weiss, an analyst for Argus Research in New York, said in a telephone interview today. Weiss rates ConocoPhillips a “buy” and doesn’t own shares.
Alliance will be one of two large Gulf Coast refineries looking for a buyer, as BP PLC plans to sell its Texas City, Texas, plant.
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